Bankruptcy

May Bankruptcy Filings Climb to Over 6,000 Per Day

By Bob Lawless

According to data from Automated Access to Court Electronic Records ("AACER"), there were over 120,000 U.S. bankruptcy filings in May 2009 or 6,020 for each of the 20 business days in May. That is the first time daily bankruptcy filings have topped the 6,000 mark since the 2005 bankruptcy law was adopted.

The May filing rate represented a 2.8% increase from the previous month and a year-over-year increase of 40.9%. The April daily filing rate had declined by 2.4%, meaning the increase in May just made up for the April decline plus a little more. The pattern for 2009 is consistent with recent years with monthly up and downs through the summer but no consistent increases until later in the year. It is important not to make too much out of the month-to-month changes in the bankruptcy filing rate. It is the long-term trend that matters, and the graph to the right shows how the long-term trend is heading us back toward the daily filing rate before the 2005 law was enacted.

There are many different ways to define "the daily filing rate before the 2005 law was enacted. Using data from 2005, however, taints the calculation as filings started spiking as early as the spring of 2005 to avoid the effects of the law, although it would not go into effect until October 2005. I used the average daily filing rate for 2004 (6,339) as the benchmark for the pre-2005 filing rate. The horizontal red line on the graph shows how close we are to hitting that mark.

Looking at filings on an annualized basis, the returns from May keep us on track for the previously projected 1.45 - 1.50 million bankruptcy filings this year. Extrapolating from what we have seen so far, total 2009 filings will be:

• 1,393,000 filings if bankruptcy filings continue for the rest of the year at the same daily rate (5,571 per day) as they have averaged for the first five months of 2009
• 1,459,000 filings if bankruptcy filings continue at the same daily rate (6,020 per day) as they have averaged for May
  
• 1,487,000 filings if bankruptcy filings for the remaining seven months of 2009 constitute the same proportion of total filings as the last seven months of 2008 constituted for total filings that year (about 61.4%)

Of these different estimates, the first tends to be particularly conservative because bankruptcy filings have been going up and look to keep going up. The average daily filing rate almost certainly will be higher by the end of the year than it has been so far. Thus, although the first estimate is less than 1.40 million filings, I tend to discount it and look more to the other two. The final measure especially is useful as it captures the cyclicality in the bankruptcy filing rate.

Full post as published by Credit Slips on June 03, 2009 (boomark / email).